Merger: In a merger, the boards of directors for two companies approve the combination and seek shareholders' approval. After the merger, the acquired company ceases to exist and becomes part of the acquiring company. For example,
Acquisition: In a simple acquisition, the acquiring company obtains the majority stake in the acquired firm, which does not change its name or legal structure.
Consolidation: A consolidation creates a new company. Stockholders of both companies must approve the consolidation, and subsequent to the approval, they receive common equity shares in the new firm.
Tender Offer: In a tender offer, one company offers to purchase the outstanding stock of the other firm at a specific price. The acquiring company communicates the offer directly to the other company's shareholders, bypassing the management and board of directors.
Acquisition of Assets: In a purchase of assets, one company acquires the assets of another company. The company whose assets are being acquired must obtain approval from its shareholders. The purchase of assets is typical during bankruptcy proceedings, where other companies bid for various assets of the bankrupt company, which is liquidated upon the final transfer of assets to the acquiring firm(s).Management Acquisition: In a management acquisition, also known as a management-led buyout (MBO)
What's the Difference Between a Merger and an Acquisition?
Although they are often uttered in the same breath and used as though they were synonymous, the terms merger and acquisition mean slightly different things. A merger occurs when two separate entities (usually of comparable size) combine forces to create a new, joint organization in which – theoretically – both are equal partners. For example, both Daimler-Benz and Chrysler ceased to exist when the two firms merged, and a new company, DaimlerChrysler, was created. An acquisition refers to the purchase of one entity by another (usually, a smaller firm by a larger one). A new company does not emerge from an acquisition; rather, the acquired company, or target firm, is often consumed and ceases to exist, and its assets become part of the acquiring company. Acquisitions – sometimes called takeovers – generally carry a more negative connotation than mergers, especially if the target firm shows resistance to being bought. For this reason, many acquiring companies refer to an acquisition as a merger even when technically it is not.
Legally speaking, a merger requires two companies to consolidate into a new entity with a new ownership and management structure (ostensibly with members of each firm). An acquisition takes place when one company takes over all of the operational management decisions of another. The more common interpretive distinction rests on whether the transaction is friendly (merger) or hostile (acquisition).
From the perspective of business structures, there is a whole host of different mergers. Here are a few types, distinguished by the relationship between the two companies that are merging:
• Horizontal merger - Two companies that are in direct competition and share the same product lines and markets.
• Vertical merger - A customer and company or a supplier and company. Think of a cone supplier merging with an ice cream maker.
• Congeneric mergers - Two businesses that serve the same consumer base in different ways, such as a TV manufacturer and a cable company.
• Market-extension merger - Two companies that sell the same products in different markets.
• Product-extension merger - Two companies selling different but related products in the same market.
• Conglomeration - Two companies that have no common business areas. There are two types of mergers that are distinguished by how the merger is financed. Each has certain implications for the companies involved and for investors:
• Purchase Mergers - As the name suggests, this kind of merger occurs when one company purchases another. The purchase is made with cash or through the issue of some kind of debt instrument; the sale is taxable. Acquiring companies often prefer this type of merger because it can provide them with a tax benefit. Acquired assets can be written-up to the actual purchase price, and the difference between the book value and the purchase price of the assets can depreciate annually, reducing taxes payable by the acquiring company.
• Consolidation Mergers - With this merger, a brand new company is formed and both companies are bought and combined under the new entity. The tax terms are the same as those of a purchase merger.
Naturally, both sides of an M&A deal will have different ideas about the worth of a target company: Its seller will tend to value the company at as high of a price as possible, while the buyer will try to get the lowest price that he can. There are, however, many legitimate ways to value companies. The most common method is to look at comparable companies in an industry, but deal makers employ a variety of other methods and tools when assessing a target company.
Healthcare 360 Degree Consultants is the premium consultancy segment who do Market survey along with DD (Due Diligence) for you .
You can bang upon us for a correct and actual valuation of the organistion, (Both In books & Off Books) It's hard for investors to know when a deal is worthwhile. The burden of proof should fall on the acquiring company. To find mergers that have a chance of success, investors should start by looking for some of these simple criteria:
• A reasonable purchase price. A premium of, say, 10% above the market price seems within the bounds of level-headedness. A premium of 50%, on the other hand, requires synergy of stellar proportions for the deal to make sense. Stay away from companies that participate in such contests.
• Cash transactions. Companies that pay in cash tend to be more careful when calculating bids and valuations come closer to target. When stock is used as the currency for acquisition, discipline can go by the wayside.
• Sensible appetite. An acquiring company should be targeting a company that is smaller and in businesses that the acquiring company knows intimately. Synergy is hard to create from companies in disparate business areas. Sadly, companies have a bad habit of biting off more than they can chew in mergers. Mergers are awfully hard to get right, so investors should look for acquiring companies with a healthy grasp of reality.
1 reasonable steps taken by a person to avoid committing a tort or offence. ( a comprehensive appraisal of a business undertaken by a prospective buyer, especially to establish its assets and liabilities and evaluate its commercial potential )
Due diligence is an investigation of a business or person prior to signing a contract, or an act with a certain standard of care. It can be a legal obligation, but the term will more commonly apply to voluntary investigations. A common example of due diligence in various industries is the process through which a potential acquirer evaluates a target company or its assets for an acquisition. The theory behind due diligence holds that performing this type of investigation contributes significantly to informed decision making by enhancing the amount and quality of information available to decision makers and by ensuring that this information is systematically used to deliberate in a reflexive manner on the decision at hand and all its costs, benefits, and risks.
1. Financial due diligence includes an analysis and review of the target company’s financial statements, tax returns, accounting policies, and financial trends. It serves as the starting point for your due diligence process.
2. Legal due diligence is critical. This step requires a thorough analysis and review of corporate documents; contracts and agreements; ongoing, pending and potential litigation; environmental factors; and legal and regulatory compliance.
3. Business due diligence requires the analysis and review of strategic and business plans, customers and products, and markets and competition. It will help you identify whether the industry is about to undergo a change and whether one customer comprises a large majority of the target’s customer base, therefore presenting risk should that customer leave subsequent to closing the transaction.
4. Operations due diligence includes the analysis and review of the company’s technology, fixed assets and facilities, as well as real estate and insurance coverage. It also looks at whether there is any significant operational risk that affects pricing or executing the deal at all.
5. Human Resources due diligence looks at the organization’s structure, employee benefits, management and personnel, and labor matters. For example, are there any union disputes or issues with employee non-competes?
With a strategic approach of Healthcare 360 Degree Consultancy and our due diligence process, Our company will give fair & far more likely to not only make a successful acquisition, but also to ensure the long-term viability of the company that emerges from the acquisition. In the coming weeks, our blog series on due diligence will provide you with a comprehensive look at the many important aspects of M&A due diligence.